Trading in steel futures at the London Metal Exchange has started to pick up, with volumes up nearly fourfold in the first half of the year, marking the first sign of interest by producers, consumers and investors on this nascent derivatives market, the FT reports. The LME is battling with rival exchanges in New York, Shanghai and Dubai for dominance in derivatives trading in the $500bn-a-year steel market – one of the world’s largest commodities market by value.

India is planning to conduct twice-yearly stress tests on its banks, following financial regulators in the US and Europe, the FT reports. The Reserve Bank of India said on Tuesday it had conducted rudimentary stress tests in the global financial crisis to check credit and interest rate risk, but would carry out more sophisticated tests in future to build confidence in the country’s banking system.

The Big Four accountants’ dominance of the audit industry is facing mounting international scrutiny after the UK’s House of Lords launched a review into the firms’ role in the financial crisis, the FT reports.

Tomkins shareholders have expressed anger at the price and “massive” management incentive package in an agreed takeover bid from Canadian investors that values its equity at almost £3bn, the FT reports. Standard Life, one of Tomkins’ biggest shareholders with just under 3 per cent, said the bid from the Onex consortium undervalued the the UK engineering company.

A bankrupt lorry driver who orchestrated an audacious scam to sell the Ritz Hotel and Casino for £250m has been jailed for five years, the FT reports. Anthony Lee, 49, duped his victims into making a £1m payment in a “well-targeted and extremely ambitious” con based on “one great big lie”, Southwark Crown court heard.

European bank stocks soared on Tuesday, as buoyant results from UBS, relief at watered-down global regulatory proposals and the afterglow of last Friday’s stress-test results overcame investor nervousness, the FT reports. The FTSE Eurofirst banks index rose nearly 5 per cent, the best performance since the €750bn eurozone bail-out package was sealed on May 10, outstripping other sectors in Europe and bank stocks elsewhere in the world.

BP moved to repair its image in the wake of the huge oil spill in the Gulf of Mexico as the energy group unveiled plans to sell $30bn of assets and confirmed the departure of its chief executive, the FT reports. The announcements came as BP reported one of the largest losses in British corporate history, losing $17bn after tax in the second quarter after a $32.2bn pre-tax provision to pay for cleaning up the spill and compensating its victims.

The US Sixth Circuit Court of Appeals has thrown out the city of Cleveland’s case against 22 banks and mortgage lenders, alleging they created a public nuisance by issuing mortgage-backed securities, which subsequently led to a rash of foreclosures locally and a generalised blot on the Cleveland landscape.

Apparently, according to Reuters, there was “too indirect” a link between the defendants’ actions and the damage done to Cleveland’s neighbourhoods. Read more

Jerome Kerviel stood accused by Société Générale of taking mass positions in DAX, CAC and Eurostoxx futures; positions which the bank later had to liquidate at a well publicised cost of €4.9bn over the end of January 2008.

However, in all the coverage generated there has been scant mention of the fact that Kerviel’s responsibilities on the Delta 1 desk included the trading of Socgen ETFs (as marketed under the Lyxor brand name). Or that Lyxor CAC, DAX and Euro Stoxx 50 ETFs were impacted disproportionally over the liquidation period. Read more

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

As the market turns its head away from Europe’s deficits, it seems that it may increasingly be turning its attention back to the size of the US fiscal burden instead (potentially).

The latest evidence for this comes in the fact that after skirting around the zero level, the US 10-year treasury swap spread turned, ever so briefly, negative on Tuesday — for the first time since March this year (when European worries overshadowed most other market concerns). Read more

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

The cast of Jersey Shore rang the opening bell at the New York Stock Exchange on Tuesday. Yet they were banned by their publicist from talking to the media. This video on FT Alphaville might help explain why… Read more

A closer look at the adverse scenario assumptions made by the Committee of European Banking Supervisors (CEBS) for use in the European stress tests reveals one particular recession-defying European country high up in the sovereign haircut leagues. Read more

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

The investor Carl Icahn plans to sue Lions Gate Entertainment for ‘scorched-earth’ tactics that have impeded his bid for a hostile takeover, Reuters reports. Lions Gate’s recent debt-to-equity swap reduced Icahn’s stake to 33.5 per cent from 37.9 per cent, as well as hampering his ability to effect board changes. The lawsuit aims to rescind the note exchange, and follows Icahn’s latest offer for Lions Gate’s shares made last week.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

The foreign-exchange market grew at a double-digit rate in 2010′s first half, helping trading volumes to reach a record $4 trillion, the WSJ reports. Volatility caused by the European sovereign debt crisis boosted trading, but shifts in Australian currency trading show a longer-term re-weighting of FX to emerging markets. All except one country — IMF officials told the Journal that China’s renminbi remains ‘substantially undervalued’, even after the authorities introduced a flexible exchange rate in June.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

China’s banks are facing serious default risks on more than one-fifth of the Rmb7,700bn ($1,135bn) they have lent to local governments across the country, senior Chinese officials have told the FT. In a preliminary self-assessment carried out at the request of the country’s regulator, banks identified about Rmb1,550bn in questionable loans to local government financing vehicles – which are mostly used to fund regional infrastructure projects. Now that’s a stress test, says the FT’s Lex, while FT Alphaville points out that Chinese credit ratings are also grabbing headlines.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

The European Commission has begun two investigations into IBM’s position in the market for mainframe computers, bringing back memories of the antitrust case faced by Microsoft on the continent, the NYT reports. Europe’s competition commissioner Joaquin Almunia is building on his predecessor’s work on Microsoft by focusing on the information technology sector. Mainframes are a central pillar of IBM’s business, with perhaps 40 per cent of operating profit related to the products, the FT adds.

So Deutsche Bank has decided to set a good example to its peers and play ball with Europe’s bank regulators — sort of. Amid European mutterings about German bank recalcitrance — i.e. the refusal by six German banks to publish their government debt exposure as part of European banking stress tests – Deutsche said on Monday it would publish full details of its sovereign holdings.

Err, well, sehr gut, boys — apart from the fact that Deutsche had already listed its main sovereign debt exposure in a June 10 presentation to investors, outlining a net sovereign exposure of €3.2bn to Italy, €500m to Greece and €200m to Ireland, and no such holdings in Spain and Portugal. Read more

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Global banking regulators have reached a breakthrough agreement to tighten capital requirements and impose new worldwide liquidity and leverage standards, but softened some of their proposals and delayed others to at least 2018, the FT reports. All but one of the Basel Committee’s 27 member countries – believed to be Germany – signed up to the proposals. While some changes to the definition of liquid assets will please banks, they are still on the hook for much tighter capital rules, Bloomberg says.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

The debate on the economic of success of President Obama’s stimulus program is hotting up eighteen months after it began, with deficit concerns coming to the fore, reports the WSJ. Arguments over the $862bn measure have become especially acute as both parties weigh up how to replace Bush-era tax cuts expiring at the year’s end. Federal stimulus will leave behind a mixed fiscal picture for U.S. states when it too ends, the FT adds, noting that tax revenues look set to improve in 2011, after investor fears over the size of many municipal fiscal deficits.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

UBS posted strong investment banking performance in the second quarter with profits of 2bn Swiss francs above expectations of $1.34bn, while lower loan loss provisions led Deutsche to report profits in line with consensus, Reuters reports. Investment banking at Deutsche declined in line with trends at such competitors as Goldman Sachs, reports Bloomberg, amid a 6.4 per cent rise in profit. While UBS has also warned that volatile markets could leave clients wary of transactions, chief executive Oswald Gruebel has reduced the rate of client outflows, the FT says.

Deutsche Bank also unveiled €14.8bn of gross exposure to sovereign debt issued by peripheral countries such as Greece, the FT adds, following criticism of its refusal to disclose its holdings in recent stress tests.

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

BP plans to sell assets worth $30bn (€23bn, £19bn) to meet the costs of its massive oil spill in the Gulf of Mexico, and has confirmed the departure of its chief executive Tony Hayward, the FT reports. The firm’s American managing director Bob Dudley will take charge in October. Dudley has a daunting strategic task ahead of him, the WSJ says, in dealing with the future of the energy giant’s US operations.

Indeed, BP posted a record loss of $17.2bn in its second-quarter results due to $32.2bn pre-tax provisions for costs from the spill, Bloomberg reports. The company is turning into a well-functioning litigation-offset machine — but its future as an oil company is as unclear as ever, FT Alphaville says.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

Is Bloomberg trying to tell us something about the ICO’s new €23bn CLO?

July 26 (Bloomberg) — Instituto de Credito Oficial, a Spanish government agency that lends to businesses, plans to issue 14.8 billion euros ($19.22 billion) of bonds backed by company loans . . . Amid the financial crisis, Spanish banks have put together asset-backed bond issues that they don’t sell, instead using them as collateral for European Central Bank loans. The nation’s banks borrowed a record 126.3 billion euros from the ECB in June, according to data compiled by the Bank of Spain. Read more

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.